EDITORIAL: Crack down on abusive lending

New auto-title loans are the latest form of predatory lending

LoanMax Title Loans on Colerain Avenue in Colerain Township

If there's a way to exploit the law to make a lot of money quickly, you can bet someone will figure it out.

The rise of a new type of predatory lending using cars as collateral is a way to get around Ohio's law restricting payday loans, the type of loans that exploit the vulnerable, the poor and the unsophisticated.

Businesses with names like UrgentCash, Cash Max and Go Cash are working loopholes in Ohio's lending laws to loan money under the same outrageous terms that lawmakers and voters tried to do away with in 2010.

Regulators at the Ohio Department of Commerce need to step in, investigate and then revoke the licenses of those businesses found to be evading payday lending laws. And the state legislature should specifically outlaw this new form of abusive lending.

Auto-title loans appear to be little more than payday loans under a new name. They both carry excessively high interest rates, demand payback in a short period of time and don't follow traditional loan-writing standards.

The practices of payday loan businesses prompted the legislature to enact restrictions on these lenders, including a cap of 28 percent on the annual percentage rate and a minimum payback term of 31 days. But a report by Policy Matters Ohio, a Columbus-based think tank, found that, despite that law, "payday lending in Ohio remains virtually unchanged."

The report found that lenders are using other existing laws to continue to issue the usurious loans. The report found effective annual percentage rates of more than 350 percent for auto-title loans.

This new type of loan uses the title of a car as security rather than a paycheck, as payday loans do. The borrower risks having the car repossessed if the loan isn't paid back on time. And paying it back isn't easy. Some lenders require payment in two weeks, including exorbitant interest and fees. In an example cited by the report, an auto-title loan of $1,600 made by a business called LoanMax would require a payoff of $2,109, an amount that included $466 in fees.

These types of loans prey on the vulnerable and those without steady income. These are people who are the least likely to have the means to pay them back. As a result, they could lose their cars, and without cars, lose the means to get to work, school or even to the grocery. That leaves them susceptible to an economic spiral that can be increasingly difficult to pull out of.

Attorney General Mike DeWine, the Ohio Department of Commerce and state lawmakers need to step up their vigilance on behalf of consumers. Enforce existing laws governing lending so businesses trying to evade them are shut down or penalized. Beef up existing legislation to specifically prohibit auto-title lending.

These are abusive practices and they shouldn't be allowed in Ohio.

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EDITORIAL: Crack down on abusive lending

If there's a way to exploit the law to make a lot of money quickly, you can bet someone will figure it out.